Falling LFPR isn’t a huge deal

LFPR is low. That’s all over the news these days. Mostly just conservative pundits trying to downplay the economic recovery.

Now, there are good reasons to downplay the recovery. Zero percent interest rates for 80+ months with no end in sight—that’s a much better reason.

But that aside, the low (and even falling) LFPR alone just isn’t evidence of poor recovery. LFPR, as I’ve explained before, is sensitive to demographic shifts that don’t necessarily correlate with any economic trends in particular. Theoretically, a low LFPR is a long-term economic goal—more wealth means fewer people (especially 18-24 and 55+ year olds) need to work in order to maintain a certain quality of life. Stay in school longer, retire earlier, go fishing, chill-out, etc.

For example, the percentage of 16-24 year olds as part of the workforce has fallen since 1990, as college becomes attainable for more people. That’s good. The LFPR also fell dramatically over the past several hundred years, as capital accumulation made it possible for people to actually quit working when they get old, or to put off work until adulthood. Again, that’s good.

Also, LFPR fell almost every year from 1956 to 1964, during which time GDP grew by more than 50 percent. That’s really good.